The Pros & Cons of Buying vs. Leasing a New Car

The Pros and Cons of Buying vs. Leasing a New Car

In the market for a new car? You probably have a ton of questions about whether to lease or buy—and we’re here to give you a breakdown of the benefits of each. As one of the top Subaru dealers in Birmingham, there’s nothing more important to us than educating our customers. Here are the advantages of buying and leasing a new Subaru.


New Car Leasing Benefits

When you buy a new car like a Subaru, your standard auto loan amount and monthly payments are based on the total purchase price of the vehicle. But this is not the case with a lease. When you lease, you are actually paying the difference between the car’s price and what the value of it is at the end of the lease.


For example: Let’s assume the price of your new SUV is $40,000. When your three-year lease is up, its residual value is 55% of the original purchase price. That means this particular vehicle would be worth around $22,000 at the end of the lease. Your payments would be calculated on the remaining $18,000 instead of the full $40,000. In other words, you can qualify for a more expensive car for less money over the same 36-month period.


Leases come in all shapes and sizes and so do their down and monthly payments. Sometimes, car dealerships offer $0 down and $0 due at lease signing. However, this will affect your monthly lease payments; the more you put down up-front, the less your monthly payment will be.


If you care about warranty coverage and have a three-year lease—which is the most common lease length—many manufacturer’s bumper-to-bumper warranties will cover you through the term of the lease. Of course, you still have to perform regularly scheduled maintenance as spelled out in your owner’s manual. Failing to maintain your vehicle could result in costly fees. Also, leasing may come with Gap Insurance, which helps cover the residual cost of the leased vehicle if it is ever totaled in a crash.


Another benefit of leasing compared to purchasing has to do with whether you prefer the most up-to-date features, technology, and styles. If that’s the case, you may want to lease a new car every three years or so.


And if you aren’t a fan of trading your car in, then you can just walk away from the lease by turning your car into the dealership or leasing a new vehicle at that time. (Or you can opt to re-financing the balance of your lease and keep your vehicle.)


Cons of Leasing a Car


There are some drawbacks to leasing that you should consider. Depending on how much or how little you drive, mileage restrictions could cramp your style. You’ll need to pay attention to how many miles you drive a year because excess mileage fees can add up in a hurry. Most standard mileage restrictions are 10,000 or 12,000 miles per year or 30,000 to 36,000 miles over the course of the three-year lease. These limits vary, so be sure to ask your car dealer for info.


Unlike a purchase, you aren’t buying the car per se; you are renting it for a specific time period, much like you’d be renting an apartment. Consequently, you aren’t building any equity in the vehicle, so if you do decide to buy it, you will have paid a premium just to lease it.


In addition, you must have an excellent credit score to qualify for a lease.


Benefits of Buying a New Car


If you are someone who plans to keep your car for a while, then buying your new car may be the best choice. Purchasing a car also saves those monthly payments once the loan has been paid off. Plus, you shouldn’t have to worry about excess-mileage fees or limitations on aftermarket vehicle customization.


Financing may also be the only way someone with poor credit can purchase a new car. At our Subaru dealership, for instance, we help all customers get qualified for a car loan, no matter their credit history or score. Monthly payments or down payments may be more, but this type of option isn’t available when leasing.


Cons of Purchasing a Car


When it comes to buying a car, the glass is either half empty or half full. Some of the drawbacks associated with purchasing a car include dealing with negative equity (also called being upside down on your loan). This will affect your car’s trade-in value and, ultimately, how much you will have to pay for a new vehicle.


Furthermore, you’ll generally have to come up with more money down, since some banks require between 10% and 20% of the purchase price as a down payment. Other factors include the annual percentage rate, or APR, being charged and the length of the loan. Both of these can affect your monthly payment and how much you are actually paying for the vehicle.


When you choose to buy a car, you’ll be on the hook for maintenance once that vehicle gets up in age and mileage. Leased cars normally only require regular maintenance, making it much better for busy owners.



Let Us Help You Decide Between Buying & Leasing a Subaru


Our auto finance experts here at Jim Burke Subaru will help you navigate the many financing options available to you based on your lifestyle, income, credit score, and driving needs. We’ll customize a package that will make it easy for you to drive home the new Subaru of your dreams, regardless of whether you choose to lease or purchase.


Now’s the time to take advantage of our numerous Subaru specials and offers, too. You may be able to lease a new Subaru without putting any money down! Contact our Subaru dealership in Birmingham at (205) 588-6281 to schedule a test drive. Or just swing by our dealership at 1301 5th Ave N. We’ll be here.